Blockchain & Cryptocurrency , Cryptocurrency Fraud , Fraud Management & Cybercrime
Cryptohack Roundup: Huione Guarantee
Also: FTX and Mt. GoxEvery week, Information Security Media Group rounds up cybersecurity incidents in digital assets. This week, Elliptic alleged that Huione Guarantee is laundering money, the sentencing dates of former FTX executives were revealed, a Paxful co-founder pleaded guilty, and Mt. Gox started to repay its debts.
See Also: Revolutionizing Cross-Border Transactions with Permissioned DeFi
Huione Guarantee
Blockchain analytics firm Elliptic alleged that the Cambodia-based marketplace Huione Guarantee is involved in money laundering and other illicit activities. Since its inception in 2021, crypto wallets linked to Huione and its merchants have received at least $11 billion, and most payments are likely tied to illegal activities.
Huione Guarantee is part of the larger Huione Group, which operates the payments app Huione Pay and is connected to sectors such as insurance, airlines and real estate in Southeast Asia. Elliptic alleges that Huione executives have ties to Cambodian Prime Minister Hun Manet.
Elliptic argues Huione willfully ignores criminal activities, including merchants offering money laundering services, sexploitation schemes and malware distribution.
A report from the analytics firm includes screenshots of conversations about laundering proceeds from scams and ads for electric shock collars used to control exploited workers in scam compounds in Myanmar, Laos and Cambodia.
Elliptic has identified and labeled hundreds of cryptocurrency addresses controlled by Huione companies to prevent further money laundering.
FTX
FTX co-founder Gary Wang and former Engineering Director Nishad Singh are set for sentencing in U.S. federal court later this year after testifying against disgraced former CEO Sam Bankman-Fried. Singh's sentencing is scheduled for Oct. 30, and Wang will be sentenced on Nov. 20. Both have pleaded guilty to the charges against them.
Though the two face potentially lengthy prison terms, they are expected to receive reduced sentences due to their cooperation with prosecutors.
During Bankman-Fried's trial, Singh testified about the opulent Bahamas penthouse he shared with the crypto wunderkind. He recounted a September 2022 conversation in which he learned of Alameda's $13 billion in unrepayable borrowed funds. Singh said he felt betrayed but remained with FTX. Wang testified that Alameda Research, under Bankman-Fried's direction, was allowed to withdraw funds even when it had a negative account balance.
Bankman-Fried is serving a nearly 25-year sentence that also requires him to repay up to $11 billion in losses. A jury found him guilty in November of seven criminal counts, including wire fraud, conspiracy to commit wire fraud, and conspiracy to commit securities and commodities fraud (see: Convicted: 'King of Crypto' Bankman-Fried Now King of Fraud).
Paxful
Artur Schaback, co-founder of Paxful Inc., pleaded guilty to U.S. federal court charges" of failing to establish an effective anti-money laundering program on the company's peer-to-peer crypto-trading platform. As the former chief technology officer, Schaback operated Paxful from July 2015 to June 2019 without adequate know your customer" procedures.
Paxful enabled users to trade cryptocurrencies for fiat currency and gift cards. Schaback knowingly provided false AML policies to third parties and failed to report suspicious activities, leading to the platform being used for money laundering, sanctions violations, fraud and romance scams.
Schaback faces a maximum of five years in prison and will be sentenced on Nov. 4. The 36-year-old Estonian national will step down from Paxful Inc.'s board of directors. Schaback served as Paxful's chief operating officer until February 2022. The platform temporarily shut down in April last year amid a legal dispute between Schaback and CEO Ray Youssef over company control.
Mt. Gox
Defunct crypto exchange Mt. Gox has started to repay its debts in bitcoin and bitcoin cash to some creditors through designated crypto exchanges, in line with its rehabilitation plan.
A post on MtGoxBalanceBot's X, formerly Twitter, account says that the total bitcoin balance on all known addresses of the Mt. Gox Trustee is 94,457 BTC, and 47,288 BTC have been moved from these addresses so far.
Remaining repayments will be made after concerned parties meet conditions including confirming account validity and creditors' acceptance of the intent to subscribe to the Agency Receipt Agreement by designated crypto exchanges.
Founded in 2010 by Jed McCaleb, Mt. Gox was one of the largest BTC exchanges. It handled 70% of global BTC transactions at its peak. McCaleb sold the exchange to Mark Karpelès in 2011. In early 2014, the exchange suspended all BTC withdrawals due to technical issues and later revealed the loss of approximately 850,000 BTC due to a security breach. Mt. Gox filed for bankruptcy in February 2014 with liabilities far exceeding its assets. The case transitioned to civil rehabilitation in 2018, and Karpelès was convicted of falsifying financial records in 2019.
Users have reported being repaid on Reddit posts. A post on the platform details an email received by Mt. Gox creditors stating, "On July 5, 2024, the Rehabilitation Trustee made a blockchain transfer of the BTC/BCH amount repayable to you as the Base Repayment and the Early Lump-Sum Repayment or the Intermediate Repayment." The email was signed by MtGox Co. Ltd. as the rehabilitation debtor and Nobuaki Kobayashi, attorney-at-law, as the rehabilitation trustee.